Alfandary et al v. Nikko Asset Management Co., Ltd. et al

Filing 141

MEMORANDUM & ORDER terminating 115 Letter Motion for Local Rule 37.2 Conference. For the foregoing reasons, Defendant shall show cause why it should not be sanctioned for use in the Tokyo Action of information obtained in discovery in this act ion in contravention of the Protective Order [dkt. no. 90]. Counsel shall confer and inform the Court by letter no later than May 3, 2021, of a proposed briefing schedule on the order to show cause. Pending resolution of the order to show caus e, the Court reserves decision on the cross motions to modify the Protective Order [dkt. nos. 115, 117]. Plaintiffs' separate motion for an anti-suit injunction [dkt. no. 117] is DENIED. The Clerk of the Court shall close the open motion. SO ORDERED. (Signed by Judge Loretta A. Preska on 4/22/2021) (va)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
CHRISTINA ALFANDARY, et al.,
Plaintiffs,,
No. 17 Civ. 5137 (LAP)

-against-

MEMORANDUM & ORDER

NIKKO ASSET MANAGEMENT, CO.,
LTD.
Defendant.

LORETTA A. PRESKA, Senior United States District Judge:
Before the Court are the parties’ letters seeking to modify
the Protective Order entered on December 16, 20191 and to enjoin
Defendant Nikko Asset Management Co., Ltd. (“Nikko” or
“Defendant”) from pursuing certain legal action in Tokyo.2
Construing those letters as the parties’ moving papers and
oppositions, (1) Defendant shall show cause why it should not be
sanctioned for use in the Tokyo Action of information obtained
in discovery in this action in contravention of the Protective
Order [dkt. no. 90], (2) and Plaintiffs’ motion for an anti-suit
injunction [dkt. no. 117] is DENIED.

The Court reserves

decision on the cross motions to modify the Protective Order

(See Defendant’s Motion for Local Rule 37.2 Conference
(“Mot.”), dated Jan. 6, 2021 [dkt. no. 115]; see also
Defendant’s Reply Letter (“Def. Reply”), dated Feb. 5, 2021
[dkt. no. 121].)
2 (See Plaintiffs’ Response Letter (“Response”), dated Feb. 2,
2021 [dkt. no. 117]; see also Plaintiffs’ Reply Letter (“Pls.
Reply”), dated Mar. 17, 2021 [dkt. no. 134].)
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[dkt. nos. 115, 117] pending resolution of the order to show
cause.
I.

Background

The Court assumes familiarity with this dispute’s general
background, which has been set forth in three prior Opinions.
(Opinion, dated Oct. 4, 2018 [dkt. no. 52]; Opinion, dated June
19, 2019 [dkt. no. 78]; and Opinion, dated Sept. 30, 2019 [dkt.
no. 79].)

The Court briefly recounts the facts here.

a. Facts
Plaintiffs are former senior executives of either Nikko,
its New York-based wholly owned subsidiary, Nikko Asset
Management of America, Inc. (“NAMA”), or its European operating
subsidiary, Nikko Asset Management Europe (“NAME”), who contend
Defendant intentionally undervalued their stock acquisition
rights (“SARs”).

(Amended Complaint (“Am. Compl.”), dated Dec.

26, 2019 [dkt. no. 91], ¶¶ 2, 190-231.)

Defendant is a

privately held investment advisor and asset manager
headquartered and incorporated in Tokyo, Japan.

(Id. ¶ 25.)

At issue in these specific motions are Plaintiff Mr.
Reidenbach’s Separation Agreement and the subsequent action
Defendant filed against him to enforce it.
On December 14, 2020, Nikko sued Mr. Reidenbach in Tokyo
District Court for violating his April 2015 Separation
Agreement.

(Mot. at 1; see also Response at 2.)

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In addition to

designating Tokyo District Court as the exclusive forum for
claims arising out of its provisions, the Separation Agreement
provides, in relevant part, that Mr. Reidenbach:
(i) shall not (with exceptions not applicable here)
disclose to any third party any confidential information of
Nikko which he “obtained in his capacity as an employee or
director of” Nikko; (ii) “agrees . . . to waive irrevocably
and release and forever discharge” Nikko from “any and all
. . . claims or demands whatsoever (whether existing,
potential, in the future or otherwise) . . . “; and (iii)
“represents and warrants that he has not filed nor will
file or will otherwise be involved in, directly or
indirectly, any lawsuits, arbitrations or any other legal
action . . . against [Nikko].”
(Mot. at 1-2 (emphasis omitted) (quoting Separation Agreement,
dated Apr. 30, 2015 [dkt. no. 115-1], ¶¶ 9, 14(Ex. 1)).)
Defendant claims that Mr. Reidenbach breached the
Separation Agreement by divulging confidential information to
the Plaintiffs and by joining this lawsuit.3

(See Mot. at 2.)

Additionally, Defendant asserts that it neither used nor
referenced any confidential discovery in this case when
commencing the Tokyo Action and obtaining ex parte liens against
Mr. Reidenbach’s assets.4

(Id.; see also Response at 2.)

Among other things, Defendant avers that Mr. Reidenbach
provided Plaintiffs with “a detailed analysis of his objections
to the valuation, based on his knowledge of that process as CFO
and his access to Nikko’s non-public information” and “internal
management reports presented to Nikko’s Board of Directors.”
(Mot. at 2.)
4 The Protective Order issued on December 16, 2019 states “[a]ll
Confidential Information hereafter produced or disclosed shall
be used only in connection with this litigation, and shall not
(continued on following page)
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However, because some confidential discovery material allegedly
relates to Mr. Reidenbach’s purported breaches of his Separation
Agreement, Defendant asks the Court to modify the Protective
Order “[i]n the interests of promoting judicial efficiency and
avoiding duplicative discovery.”5

(Mot. at 2-3.)

According to Plaintiffs, Defendant’s motion furthers the
“improper objective[s]” of “punish[ing] Mr. Reidenbach for
blowing the whistle on [Nikko’s] own unlawful conduct . . .
[and] discourag[ing] him through retaliatory threats from
pursuing this lawsuit any further.”

(Response at 4.)

Plaintiffs point out that, before commencing the Tokyo Action,
Defendant placed liens on all of Mr. Reidenbach’s personal
property without providing him with any notice or opportunity to
be heard.

(Pls. Reply at 1.)

Additionally, Plaintiffs

emphasize the untimeliness of the Tokyo Action.

Despite knowing

of Mr. Reidenbach’s purported breaches for over five years, (see
Certified Translation of Nikko’s Petition for Order of
Provisional Seizure, dated Dec. 14, 2020 [dkt. no. 117-1], at

(continued from previous page)
be used in connection with any other lawsuit or for any other
purpose whatsoever.” (Protective Order, dated Dec. 16, 2019
[dkt. no. 90], ¶ 9.)
5 Paragraph 18 of the Protective Order permits the parties to
request “an Order seeking to modify the [Protective Order’s]
terms . . . or for any other relief . . . regarding [the
Protective Order] or the issue of confidentiality.” (Protective
Order ¶ 18.)
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11), Defendant “waited until Plaintiffs had produced their own
confidential documents and until [Nikko] had the opportunity to
depose Mr. Reidenbach and eight other Plaintiffs” about topics
relevant to the Tokyo Action to bring suit.

(Pls. Reply at 1.)

Plaintiffs, therefore, ask the Court to infer that Defendant’s
“extreme delay in commencing the Tokyo Action reveals that it
could not have done so without making use of confidential
information obtained through discovery in this case.”

(Id.; see

also Pls. Reply at 2.)
To protect against the misuse of discovery materials
available in this litigation, Plaintiffs seek to amend the
Protective Order to prohibit the use of all discovery material-whether or not designated as confidential--for any purpose
outside this litigation.

(Response at 5.)

Plaintiffs also

request an anti-suit injunction to enjoin Nikko from pursuing
the allegedly retaliatory Tokyo Action while this lawsuit is
pending.
II.

(Id. at 5-7; see also Pls. Reply at 2.)
Legal Standards
a. Modification of a Protective Order

Rule 26(c) of the Federal Rules of Civil Procedure
authorizes federal courts to issue orders “to protect a party or
person from annoyance, embarrassment, oppression, or undue
burden or expense . . . .”

Fed. R. Civ. P. 26(c).

These

protective orders are subject to modification, and the decision

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of “whether to lift or modify a protective order is . . .
committed to the sound discretion of the trial court.”

S.E.C.

v. TheStreet.com, 273 F.3d 222, 231 (2d Cir. 2001) (citation
omitted).

However, “[w]hen litigants have reasonably relied on

a protective order, . . . the court should not modify that order
‘absent a showing of improvidence in the grant of [the] order or
some extraordinary circumstance or compelling need.’”

Nielson

Co. (U.S.), LLC v. Success Sys., Inc., 112 F. Supp. 3d 83, 120
(S.D.N.Y. 2015) (quoting TheStreet.com, 273 F.3d at 229).

In

determining whether a party has reasonably relied on a
protective order, courts consider: “(1) the scope of the
protective order; (2) the language of the order itself; (3) the
level of inquiry the court undertook before granting the order;
and (4) the nature of reliance on the order.”

In re Unseal Civ.

Discovery Materials, No. 19-MC-00179 (SN), 2021 WL 1164272, at
*3 (S.D.N.Y. Mar. 24, 2021) (citation omitted).
b. Issuance of an Anti-Suit Injunction
Federal courts may enjoin the parties before them from
pursuing litigation in foreign forums.

Paramedics

Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs.,
Inc., 369 F.3d 645, 652 (2d Cir. 2004).

However, in the

interests of international comity, anti-suit injunctions should
“be used sparingly” and “granted only with care and great
restraint.”

China Trade & Dev. Corp. v. M.V. Choong Yong, 837

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F.2d 33, 36 (2d Cir. 1987) (internal quotation marks omitted).
Accordingly, the Court of Appeals “has consistently held that an
anti-suit injunction may only be granted where two threshold
requirements are met: first, the parties must be the same in
both proceedings, and second, resolution of the case before the
enjoining court must be dispositive of the action to be
enjoined.”

Eastman Kodak Co. v. Asia Optical Co., 118 F. Supp.

3d 581, 586 (S.D.N.Y. 2015) (articulating the China Trade test).
Once China Trade’s two threshold requirements are
satisfied, the Court of Appeals directs courts to consider
additional factors, including:
(1) the threat to the enjoining court's jurisdiction posed
by the foreign action; (2) the potential frustration of
strong public policies in the enjoining forum; (3) the
vexatiousness of the foreign litigation; (4) the
possibility of delay, inconvenience, expense,
inconsistency, or a race to judgment; and (5) other
equitable considerations.
Id. (citing Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara, 500 F.3d 111, 119-20 (2d Cir.
2007)).

Although courts must consider all of the discretionary

factors, the Court of Appeals has accorded “greater
significance” to the first two.
III.

Karaha Bodas, 500 F.3d at 126.

Discussion

Defendant has moved to modify the Protective Order to
permit the use of Plaintiffs’ confidential discovery material
from this case in the Tokyo Action.

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(Mot. at 2-3; Def. Reply at

2-3.)

In response, Plaintiffs request the Court to modify the

Protective Order to prohibit the use of any discovery materials
in this case for any other purpose.
at 2.)

(Response at 5; Pls. Reply

Separately, Plaintiffs request an anti-suit injunction

to enjoin Defendant from pursuing the Tokyo Action.
at 5-7; Pls. Reply at 2.)

(Response

The Court addresses each in turn.

a. The Motions to Modify the Protective Order
While ordinarily a court will freely grant a party
permission to use discovery in one case in a related case to
promote efficiency and the “inexpensive determination of every
action,” Fed. R. Civ. P. 1, here the facts set out in
Plaintiffs’ letters (Response at 4-5; Pls. Reply at 1-2) lead to
a fair inference that Defendant misused confidential discovery
materials from this case in commencing the Tokyo Action.

The

inference arises from both the timing and the substance of the
Tokyo Action.
As to the timing of the Tokyo Action, even though, as noted
above, Defendant “was aware of [the] alleged conduct when it
occurred in 2015 and reminded of the same in 2017 when the
complaint in this action was first filed,” Nikko waited another
three years--until discovery concluded in this litigation--to
commence the Tokyo Action.

(Pls. Reply at 2.)

As to both

timing and substance, the Tokyo Action was filed just days after
Defendant took depositions of nine Plaintiffs and questioned

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them about topics relevant to the Tokyo Action, including “their
interactions with Mr. Reidenbach, as well as the extent to which
their effort to challenge [Nikko’s] unlawful conduct was
motivated or informed by Mr. Reidenbach’s contemporaneous
knowledge.”

(Response at 2.)

In light of these facts, the Court finds it to be a fair
inference that Defendant commenced the Tokyo Action using
confidential materials subject to the Protective Order.
Accordingly, Defendant shall show cause why it should not be
sanctioned for use in the Tokyo Action of information obtained
in discovery in this action in contravention of the Protective
Order.
b. The Motion to Enjoin the Tokyo Action
Plaintiffs’ request for an anti-suit injunction fails to
satisfy the threshold requirements of the China Trade test.

It

is undisputed that the first threshold requirement--that the
parties are the same in both proceedings--is met.

See

Paramedics Electromedicina, 369 at F.3d at 652 (finding that the
parties need not be exactly identical; only “substantial
similarity” between the parties is required).

However, the

second requirement, that this proceeding would be dispositive of
the Tokyo Action, is not met.
Although the Court of Appeals has not articulated precisely
what it means for an action to be dispositive, it has instructed

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courts to determine first whether the “substance” of the claims
is the same in the two actions.
121.

See Karaha Bodas, 500 F.3d at

Where the cause of action alleged in the foreign action is

distinct from that alleged in the domestic proceeding, the
domestic proceeding’s resolution may not be dispositive of the
foreign action.

See C.D.S., Inc. v. Zetler, 213 F. Supp. 3d

620, 628-29 (S.D.N.Y. 2016).

However, “[t]here is no

requirement that the two actions be identical.”

Eastman Kodak,

118 F. Supp. 3d at 588 (citing Karaha Bodas, 500 F.3d at 12122).
While the claims in this case and the Tokyo Action are
related, they do not share the same “substance” because they
concern different contracts.

This case focuses on whether Nikko

breached the Allotment Agreement and Terms and Conditions of its
stock option plans in connection with its valuation and
extinguishment of Plaintiffs’ SARs.
231.)

(See Am. Compl. ¶¶ 2, 190-

The Tokyo Action, on the other hand, examines whether Mr.

Reidenbach breached his Separation Agreement by violating his
confidentiality obligations and covenant not to sue.
1; see also Response at 2.)

(Mot. at

Because the two proceedings will

turn on different issues, arguments, and evidence, a finding
that Nikko violated Plaintiffs’ SARs would have little bearing
on the Tokyo Action.

(See Def. Reply at 4.)

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Plaintiffs contend that the second threshold requirement is
satisfied because a judgment in the Tokyo Action could be
dispositive of the claims in this case.
This analysis is precisely backwards.

(See Response at 6.)

The law requires the

resolution of the case before this Court to be dispositive of
the subsequent foreign action--not vice versa.
Bodas, 500 F.3d at 121.

See Karaha

See also C.D.S., 213 F. Supp. 3d at 628

(stating that the “resolution of the first action must be
dispositive of the action to be enjoined”).

Therefore, for the

reasons discussed above, Plaintiffs have failed to satisfy the
threshold requirements of the China Trade test.
Even if the resolution of the claims before this Court
would be dispositive of the Tokyo Action, the most important
discretionary factors counsel against issuing an anti-suit
injunction.

First, the Tokyo Action does not threaten this

Court’s jurisdiction.

By pursuing its claims in the only forum

where they could be brought under the Separation Agreement’s
forum selection clause, Defendant is neither “collateral[ly]
attack[ing] . . . this Court’s prior rulings” nor
“circumvent[ing] this Court’s jurisdiction.”

(Response at 5.)

Second, public policy considerations do not appear to be
substantially frustrated by allowing a substantively different
lawsuit to proceed in the only forum where Defendant could
enforce its contractual rights.

(See Def. Reply at 5.)

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The Court shares Plaintiffs’ concerns that the Tokyo Action
seeks to silence Mr. Reidenbach and punish him for blowing the
whistle on Nikko’s alleged unlawful scheme to eliminate
Plaintiffs’ SARs.

(See Response at 7; Pls. Reply at 2.)

However, the Court acknowledges that “vexatiousness” is “likely
to be present whenever parallel actions are proceeding
concurrently.”

China Trade, 837 F.2d at 36.

Moreover, issuing

an anti-suit injunction based on vexatiousness alone would
“undermine the policy that allows parallel proceedings to
continue and disfavors anti-suit injunctions.”

Id.

“[P]rinciples of international comity and reciprocity
require a delicate touch in the issuance of anti-foreign suit
injunctions . . . .”

Ibeto Petrochemical Indus. Ltd. v. M/T

Beffen, 475 F.3d 56, 65 (2d Cir. 2007).

Accordingly, even if

Plaintiffs satisfied the China Trade test’s threshold
requirements, the discretionary factors would counsel against
issuing an anti-suit injunction.
IV.

Conclusion

For the foregoing reasons, Defendant shall show cause why
it should not be sanctioned for use in the Tokyo Action of
information obtained in discovery in this action in
contravention of the Protective Order [dkt. no. 90].

Counsel

shall confer and inform the Court by letter no later than May 3,
2021, of a proposed briefing schedule on the order to show

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cause.

Pending resolution of the order to show cause, the Court

reserves decision on the cross motions to modify the Protective
Order [dkt. nos. 115, 117].

Plaintiffs’ separate motion for an

anti-suit injunction [dkt. no. 117] is DENIED.

The Clerk of the

Court shall close the open motion.

SO ORDERED.
Dated:

New York, New York
April 22, 2021
____________________________
LORETTA A. PRESKA
Senior United States District Judge

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